Ace of Baselines: Second District Provides Tutorial for CEQA Baseline Selection

Environmental/Land Use Alert (May 6, 2020)


Opinion

The Second District Court of Appeal affirmed a judgment upholding the EIR for Tesoro’s Los Angeles Refinery Integration and Compliance Project in a 2-1 majority opinion filed April 7, 2020. (Communities for a Better Environment v. South Coast Air Quality Management District (Tesoro Refining and Marketing Company, LLC) (2d Dist. 2020) __ Cal.App.5th __.) Providing a tutorial on the inner workings of an oil refinery and governing case law, the Court rejected each of appellant CBE’s four contentions that the EIR was flawed for allegedly: (1) using the wrong “baseline” for air pollutant emissions; (2) omitting information about the composition of pre-project crude oil that the refinery processes; (3) not explaining how the agency calculated its “6,000 barrel” figure; and (4) not disclosing the existing volume of crude oil the refinery processes or its unused capacity.

Project and Background

Tesoro’s Refinery Integration and Compliance Project had two aims. First, to improve the integration of two adjacent oil refineries in Carson and Wilmington in a manner that would increase Tesoro’s flexibility in altering the ratio of its outputs (like gasoline and jet fuel) to maximize profits. Second, to increase regulatory compliance by reducing air pollution from combustion emissions from the facilities’ burners, also known as heaters. The less heat used in the refining process –measured in millions of British thermal units (Btus) per hour—the less combustion and air pollutant emissions produced.

To achieve these goals, the Project involved three components: (1) shuttering the Wilmington “Fluid Catalytic Cracking Unit” – eliminating 687 million Btus per hour from this major pre-project pollutant source; (2) installing new storage tanks, which would decrease shipping costs and reduce air pollution; and (3) changing the thermal operating limit of an H-100 heater (Heater), which heats petroleum going into the Wilmington Delayed Coker Unit (Coker). The third, Heater component is the source of the case’s controversies.

The third component would rewrite the Heater’s permit in terms of its maximum heat release rate of 302.4 million Btu per hour instead of the guaranteed rate of 252 million Btu per hour. Integral to the Court’s opinion are the following facts:
  • The change to the permit would be on paper only; there would be no physical changes to the Heater, nor to upstream and downstream processes.
  • “[T]he agency would impose a new permit limitation on air pollution from the Heater to maintain levels that would be generated if the heater never operated above 252 million Btu per hour.” The federal air pollution permit means there can be no increase in emissions from the Heater.
  • By raising the thermal operating limit, the Coker could either potentially process a slightly heavier blend of crude or increase throughput by 6,000 barrels per day, but not both. The refinery as a whole, however, could not process heavier or more crude due to physical refinery limitations upstream and downstream of the Coker.
Baseline

CBE argued SCAQMD used the wrong “baseline” in the EIR’s air quality analysis to measure pre-project pollutant emissions. Focused on measuring peak (i.e., “worst case”) pollution to control smog alerts, SCAQMD used a “near-peak” rather than an “average” baseline as the “existing condition.” The near-peak baseline was derived from data of the refinery’s worst air pollution emissions during the two-year interval preceding the Project. SCAQMD then excluded the top two percent of these data as extreme outliers — following the U.S. EPA’s customary practice — and used the remaining 98 percent of worst-day data as the pre-project baseline.

The EIR’s analysis compared the “actual pre-project near-peak emissions with projected peak emissions after the project.” The analysis determined the Project would beneficially reduce air pollution compared to existing conditions. Emissions from applicable emissions sources would decrease by 36 percent, from 1,310.4 million Btus per hour to 831.5 million Btus per hour, largely as a result of shuttering the Wilmington “Fluid Catalytic Cracking Unit.”

CBE contended the EIR was required to use an “average” rather than “peak” or “near-peak” baseline. The Court disagreed, finding SCAQMD’s baseline was consistent with governing case law and supported by substantial evidence.

Rejecting CBE’s challenge to the “near-peak” baseline, the Court recited that while an agency cannot select a baseline that is “‘merely hypothetical” or “‘illusory,’” the agency has discretion to decide how to “most realistically” measure existing physical conditions. (Citing Communities for a Better Environment v. South Coast Air Quality Management District (ConocoPhillips) (2010) 48 Cal.4th 310, 321.) A baseline is a human construct. There is no “‘uniform, inflexible rule” or “‘true,’ ‘normal,’ or ‘natural’ baseline.” “You decide what you want to measure, and then you select a baseline appropriate to your goal. What one wants to measure is a policy question, as is the choice of a baseline.” (Citing also Neighbors for Smart Rail v. Exposition Metro Line Construction Authority (2013) 57 Cal.4th 439; Communities for a Better Environment v. City of Richmond (2010) 184 Cal.App.4th 70; Rodeo Citizens Assn. v. County of Contra Costa (2018) 22 Cal.App.5th 214.)

To illustrate, the Court provided the example of evaluating the benefit of an engine tune-up on a car’s mileage. Depending whether you wanted to investigate the tune-ups impact on all mileage, or just freeway or city mileage, the appropriate baseline would vary. It may be average mileage from all miles travelled, but it could alternatively be freeway or city mileage prior to the tune up. All three are “real” measures — which is the appropriate baseline measure depends on the goal of the analysis.

Here, SCAQMD decided it wanted to measure peak (or near-peak) emissions to rationally focus on reducing smog alerts and protecting public health. Comparing pre- and post-project near-worst days was a “sensible and time-tested way” to undertake SCAQMD’s preferred analysis.

The Court rejected CBE’s contention that peak data did not measure the “actual” existing condition. SCAQMD used actual data of existing conditions from the worst 15 days in the two years prior — not a hypothetical scenario — to identify a near-peak baseline. “Averages are not inherently more ‘actual’ than peaks, and vice versa.”

Substantial evidence also supported SCAQMD’s choice to “follow the practice of the federal EPA, which uses the 98th percentile approach to regulate air pollution at the national level.” Both the federal regulatory and California CEQA goals are the same: “to protect public health and welfare.” There was no need for SCAQMD to reinvent the wheel where the federal EPA provided a valuable, “free and helpful resource on air pollution” “with similar goals, a bigger budget, a cadre of scientists, and nationwide experience.” CBE’s suggestion that a “normal” baseline is an “average” and not “peak” or “near-peak” was further immaterial.

Failure to Exhaust Administrative Remedies

CBE next argued that the EIR was informationally deficient for omitting information detailing exactly how SCAQMD calculated that the Coker could potentially increase throughput by 6,000 barrels per day. Applying established CEQA exhaustion of administrative remedies requirements, the Court held CBE forfeited this argument by failing to raise the “exact issue” to the agency as required by Public Resources Code section 21177, subdivision (a). Despite submitting 1,716 pages of comments, no equivalent claim or comment was made by CBE or another firm. Therefore, the issue was forfeited on appeal.

Omission of Information

CBE argued the EIR was fatally flawed for failing to include information about (1) the pre-project composition of the crude oil that the refinery processes; (2) the existing volume of crude the refinery processes; and (3) the refinery’s unused capacity. The Court rejected each of these arguments in turn. The Court first explained the pre-project crude oil composition was immaterial to assessing the project’s environmental impact. Citing SCAQMD’s responses to comments, the Court explained that physical refinery constraints meant the crude oil composition would remain within the refinery’s “operating envelope” (i.e., the range of crude blends that can be processed by the refinery) with or without the Project. In other words, due to upstream and downstream constraints of refining processes, the crude oil composition could not and would not change.

Information about the existing volume of crude and unused capacity was immaterial for the same reason. The Project would not increase the refinery’s capacity, which was limited by physical constraints. “No law requires a report to include unnecessary data. Further cross-checks and verifications are not needed if …substantial evidence supports the agency’s analysis.”

Dissent

Dissenting from the majority opinion on the baseline issue, Justice Stratton disagreed that use of the U.S. EPA’s 98th percentile baseline methodology was supported by substantial evidence. Justice Stratton disputed the majority’s finding a “near-peak” 98th percentile emission baseline, which occurred on just “15 out of the 730 days in the review period,” accurately represented existing physical conditions. In her view, such a 98th percentile baseline was akin to an improper hypothetical or “allowable permit conditions” baseline. (Communities for a Better Environment v. South Coast Air Quality Management District (2010) 48 Cal.4th 310, 321.) “[B]y using the 15 worst days as the baseline, the project’s potential future negative impact is, at worst, diluted and reduced, and is, at best, inaccurate.”

The dissent also found fault with the majority’s reliance on “Federal custom and practice” as the totality of substantial evidence supporting use of this baseline methodology in California. Justice Stratton further opined that, while agencies have discretion to deviate from use of existing physical conditions as the baseline in “unusual circumstances,” “the record reflects (and the majority finds) no unusual aspects of the project or surrounding conditions to justify ignoring existing environmental conditions.”

Implications

The majority opinion provides a thoughtful and informative discussion of agency selection of the appropriate baseline as a policy decision accorded judicial deference under CEQA. The opinion’s explanation of the baseline as a human construct that is selected to best accomplish a specific objective at hand presents a significant contribution legal literature on the topic. While the baseline must be based on “real” or “actual” conditions, the “existing conditions” baseline selected may vary. An agency’s baseline selection will be upheld where supported by substantial evidence.

[This case alert does not constitute legal advice and no attorney-client relationship is created by viewing or responding to this alert.  Legal counsel should be sought for answers to specific legal questions.]